The Terra Classic protocol will no longer mint terraUSD (USTC), the infamous token that slumped 99% amid the implosion of the once high-flying Terra protocol in 2022.
A community vote on Terra Classic’s governance forum that ended last week won 59% approval to stop all USTC minting. The current value of USTC is 1 cent as of Monday afternoon.
Terra Classic is the original network created by Terraform Labs. It has continued as an independent blockchain rather than Terra 2.0, which is a forked version that was created in the wake of Terra’s collapse.
TerraUSD was the token at the center of Terra’s collapse and led to a 99.9% drop in LUNA token prices, $28 billion being hemorrhage from Terra-based DeFi applications and an eventual spiral to crypto funds going bust.
Community members say the move could help protect users and outside investors who are burning USTC to help to achieve the repeg. Burning refers to the permanent deletion of tokens from circulation by sending them to an address that’s not controlled by anyone.
Algorithmic stablecoins like USTC are backed by a basket of assets, such as LUNA and bitcoin (BTC), without depending on any centralized third party to hold those assets. Most of the tokens, however, fall victim to a “death spiral” – with outflows or sales of backing assets causing a sudden de-pegging of USTC-like projects.
The USTC was intended to be pegged at $1 by this mechanism, and members hoped that burning tokens could eventually let USTC meet that goal. This, however, could require the trillions of tokens to be burned.
“Any form of minting or reminting goes completely against any community effort,” the proposal read. “Most importantly, this proposal opens the door for institutions like Binance to start burning USTC knowing that the minting and reminting is over.”
Such proposals and moves are part of a small set of engineers hoping to return Terra to its glory days.
A group calling itself the “Samurai Six” is actively working toward creating applications built on Terra Classic and rewards for developers working on the network, as CoinDesk previously reported.
These efforts aim to eventually drive value to the Terra Classic ecosystem, and, hopefully, an increase in LUNC value over time.
